Markets likely to get positive start ahead of RBI MPC decision

Indian markets extended their winning run for the fifth consecutive session and ended in green on Thursday amid volatility with a positive turnaround from FIIs for the past couple of days. Today, markets are likely to get positive start amid foreign fund inflows, despite weakness in global peers. Foreign institutional investors (FIIs) bought equities of Rs 8,539.91 crore on December 5. Investors will be eyeing the Reserve Bank of India (RBI)’s Monetary Policy Committee (MPC) meeting with the central bank governor Shaktikanta Das to announce the decision on the key interest rate at 10:00 am. This meeting holds more significance amid major economic challenges, including lower than expected Q2 GDP growth, CPI inflation surging to a 14-month high in October, and declining production levels. There are expectations that the central bank might go for a reduction in Cash Reserve Ratio (CRR) for banks instead of cutting the policy repo rate. Sentiments will get boost as V Anantha Nageswaran, the Chief Economic Advisor (CEA) of India expressed confidence in the growth of the Indian economy, and said that the Indian economy is in good health. He also said economic activity in some sectors have picked up pace during October-November and a GDP growth of 6.5-7 per cent in the current fiscal is feasible. Some support will come as the government said Russian president Vladimir Putin has expressed willingness to establish manufacturing operations in India as investments in India are profitable. Meanwhile, Finance Minister Nirmala Sitharaman will start pre-Budget consultations with various stakeholders beginning Friday as part of Budget making exercise. The first meeting as part of this series will be held with eminent economists on December 6. However, there may be some cautiousness as India Ratings and Research in the report said the current account deficit (CAD) for the September quarter is set to widen to 1.6 per cent, the most in the last seven quarters. Moreover, market regulator Securities and Exchange Board of India (Sebi) has proposed a framework to convert In The Money single stock option contracts into futures a day before the expiry. IT stocks will be in focus with report that margins for some Indian IT companies are likely to decline in the third quarter of FY25 due to seasonal and structural factors. There will be some reaction in sugar industry stocks with a private report that sugar prices in India fell to their lowest level in 1-1/2 year due to ample supplies, making it difficult for mills to pay farmers the cane price as the crushing season gains momentum. Besides, Suraksha Diagnostic to debut on the bourses today.

The US markets ended in red on Thursday ahead of jobs data that may help shape the direction of the Federal Reserve’s policy path later this month. Asian markets are trading mixed on Friday mirroring a negative close on Wall Street.

Back home, rising for the fifth straight day, Indian equity benchmarks ended with strong gains on Thursday, propelled by buying in TECK, IT and Telecom stocks amid a rally in the U.S. markets. Markets made positive start but soon erased gains and witnessed selling pressure in the first half as traders turned cautious after World Bank International Debt Report noted that India's total external debt has increased by $31 billion to $646.79 billion in 2023. The report further said that interest payment increased from $ 15.08 billion in 2022 to $ 22.54 billion in 2023. However, buying activity picked up during second half of the trading session, leading key indices to end the day on a firm note. Traders took some support with the Organisation for Economic Co-operation and Development (OECD) stating that India will continue to grow at near 7 percent growth rates over the next two years, as strong investment and recovery in farm output help sustain the momentum. OECD in a report said strong investment is the main driver of this robust performance, with accelerating public infrastructure outlays. Some support also came with Niti Aayog CEO BVR Subrahmanyam’s statement that US President-elect Donald Trump's pledge to impose high tariffs on three of its trading partners, including China will provide huge export opportunities for India and the domestic industry should prepare itself to tap into that. Recently, Trump vowed to introduce 25 per cent tariffs (or customs duty) on imports from Mexico and Canada and an additional 10 per cent on China. Besides, a positive turnaround from Foreign Institutional Investors (FIIs) for the past couple of days to India in expectation of a dovish monetary policy by RBI supported the sentiment. The RBI Monetary Policy Committee headed by Governor Shaktikanta Das will announce its policy review on December 6. Finally, the BSE Sensex rose 809.53 points or 1.00% to 81,765.86, and the CNX Nifty was up by 240.95 points or 0.98% to 24,708.40.